CHRIST

Deemed to be University

Unit 1
Part 2

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 CHRIST
Deemed to be University
Unit-1 Creating A Business Model

The 9 Elements of a Business Model?

1. Customer Segments
2. Value Proposition
3. Revenue Streams
4. Key Resources
5. Key Partners
6. Key Activities
7. Cost Structure
8. Channels
9. Customer Relationship

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 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
1.Customer Segments

● These are the groups of people/consumers or companies (B2B) that you are trying to target
and sell your product or service to.

● Segmenting your customers based on similarities such as geographical area, gender, age,
behaviors, interests, etc. gives you the opportunity to better serve their needs, specifically
by customizing the solution you are providing them.

● After a thorough analysis of your customer segments, you can determine who you are most
competent to serve. Then create customer/buyer persona for each of the selected customer
segments.

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 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
Some great examples of companies catering to different Customer Segments

● Google makes huge money from one customer segment - Google Ads while subsidizing
another segments Google Search

● Apple evolved into a company selling PCs, tablets, phones, music and software, all to
different customer segments.
● Wal-Mart aims its products to a huge price-conscious customer.
● Zappos targeted customers wanting quality shoes at a reasonable price.
● Netflix focused on sector of the entertainment market thru OTT platforms

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 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
2. Value Proposition

● It represents your unique solution (product or service) for a problem faced by a customer
segment, or, that creates value for the customer or customer segment as whole.

● It to great extent carry the description of what your product or service does to fulfill the
customers’ needs. It should clearly define why a customer would buy from your Co.

● The value proposition should be personalized and customized to include the reduction of
product search, and how you’ll manage product delivery.

Excellence and Service

 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
2. Value Proposition
● A good VP should be different from that of your competitors. If you are offering a new
product, it should be innovative or disruptive. And if you are offering a product that
already exists in the market, it should stand out with new features and attributes.

● Value propositions can be either quantitative (price and speed of service) or qualitative
(customer experience or design).

Excellence and Service

 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
2. Value proposition

● In summary, a VP should at minimum explain, in, as few words, as possible as to ...

What particular benefit users get from a product or service and why you can provide it better
than others.

For example, a restaurant might make its VP that it supports the local business by only using locally sourced
meat or vegetables. Customers choose that restaurant because they wish to support local business, even at
a higher price.

Once you’ve a few VALUE PROPOSITIONS defined/fixed, link each one to a service or
product delivery system, to ensure how you will remain valuable to customers over time.

Excellence and Service

 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
2. Value Proposition

● Amazon retails books and other products at

competitive prices, all with purchaser reviews.

● Netscape made the first modern browser

and opened up the Internet (WWW).

● Nespresso developed coffee machines for

the mass market.

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 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
3. Revenue Streams
● Revenues Streams are the sources from which a company generates money (income) by
selling their product/service to the customers.

● A Revenue Stream can belong to one of the following revenue models/category,

○ Transaction-based revenue: made from customers who make a one-time payment
○ Recurring revenue: made from ongoing payments for continuing services or post-sale services

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Unit-1 CREATING A BUSINESS MODEL Deemed to be University

3. Revenue Streams

Generally, the revenue can be from following sources/ways

● Asset sales: by selling the rights of ownership for a product to a buyer
● Usage fee: by charging the customer for the use of its product or service
● Subscription fee: by charging the customer for using its product regularly and consistently
● Lending/ leasing/ renting: the customer pays to get exclusive rights to use an asset for a
fixed period of time
● Licensing: customer pays to get permission to use the company’s intellectual property
● Brokerage fees: revenue generated by acting as an intermediary between two or more
parties
● Advertising: by charging the customer to advertise a product, service or brand using
company platforms
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 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
3. Revenue Streams

● Amazon reinvested book sale revenues into general retail and then computing services.

● Nitendo reinvested its revenue streams in low-tech games.

● Intel spent billions of its revenues on marketing its logo to PC purchasers, but got the
money back through premium-priced chips.

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 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
4. Key Resources
● List down which key resources or the main inputs you need to carry out your key activities
in order to create your Value Proposition.

● There are several types of key resources and the major ones are:
○ Human (employees - EEs)
○ Financial (cash, lines of credit, & so on)
○ Intellectual (brand, patents, IP, copyright)
○ Physical (equipment, inventory, buildings & other Infra-structure)

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Unit-1 CREATING A BUSINESS MODEL
4. Key Resources
How companies utilize the resources & the benefits out of it
● Amazon developed sophisticated technology (which it then offered in cloud services for the
benefit of customers/others).
● Google used customer data collected from search engines and its Analytics program to
develop its Ad service.
● GlaxoSmithKline monetized unused internal assets as a patents pool on neglected tropical
diseases.
● Skype employed largely free resources to undercut telecom prices.
● EasyDiagnosis employed its medical knowledge to create an online medical diagnosis
expert system.
● Aurora Health Care analyzed its medical records with business intelligence systems to offer
a superior service.

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Unit-1 Creating a Business Model Deemed to be University

5. Key Partners
Key partners are the external companies or suppliers that will help you carry out your key
activities. These partnerships are forged in order to reduce risks

Types of Key Partnerships are

○ 1. Strategic Alliance: partnership between non-competitors
○ 2. Coopetition: collaboration between business competitors, in the hope of mutually
beneficial results.
○ 3. Joint ventures: partners developing a new business
○ 4. Buyer-supplier relationships: ensure reliable supplies

Excellence and Service

 CHRIST
Unit-1 Creating a Business Model Deemed to be University

5. Key Partners
Key partners are the external companies or suppliers that will help you carry out your key
activities. These partnerships are forged in order to reduce risks

Types of Key Partnerships are

● 1. Strategic Alliance: partnership between non-competitors
eg Barns & Noble book sellers in Starbucks Coffee Shop

● 2. Coopetition: collaboration between business competitors, in the hope

of mutually beneficial results.

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 CHRIST
Unit-1 Creating a Business Model Deemed to be University

5. Key Partners

Types of Key Partnerships are

● 2. Coopetition: collaboration between business

● competitors, in the hope of of mutually beneficial results.
●
eg agreement between Pfizer and BioNTech to jointly develop a COVID-19
vaccine. In 2020 two
companies to combine development (RD) and manufacturing capabilities.

Of late in the automobile industry India too it happens like Suzuki with Toyota

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Excellence and Service

 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
5.Key Partners
How companies utilize the resources & the benefits out of it

● eBay forged relationships with 60 website, including AOL and PayPal.

● Proctor & Gamble 'Connect & Develop' policy expanded internal research through outside
partnerships.

● GlaxoSmithKline operates closely with the FDA.

● Fiat links to key suppliers through private industrial networks.

● Wal-Mart has key partnerships with suppliers.

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Unit-1 CREATING A BUSINESS MODEL
6. Key Activities
● You should list down all the key activities you need to do to make your business model
work.
● These key activities should focus on fulfilling its Value Proposition, reaching customer
segments and maintaining customer relationships, and finally generating revenue.

● There are 3 categories of key activities;

○ Production: designing, manufacturing and delivering a product in significant quantities and/ or of
superior quality.
○ Problem-solving: finding new solutions to individual problems faced by customers.
○ Platform/ network: Creating and maintaining platforms. For example, Microsoft provides a
reliable operating system to support third-party software products

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 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
6. Key Activities

● Apple makes tablet computers and smart phones.

● Commerce Bancorp provided banking services.
● Lotus makes software.
● Fiat makes motor cars.
● Dell makes computers.
● GlaxoSmithKline makes drugs.
● Cisco makes routers and other IT equipment.

Excellence and Service

 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
7. Cost Structure

● Identify all the costs associated with operating your business model.

● You’ll need to focus on evaluating the cost right from that of creating and delivering your
Value Propositions, creating revenue streams, and maintaining customer relationships & so
on.

● Businesses can either be cost-driven (focuses on minimizing costs whenever possible) and
value-driven (focuses on providing maximum value to the customer).

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Unit-1 Creating a BUSINESS MODEL Deemed to be University

8. Channels

● Channels are the ways in which the company communicates its offer to individual customer
segments.

● It acts as ‘touch points’ that let your customers connect with your company.

● Channels play a role in raising awareness of your product/service among customers &
delivering your value propositions to them. Channels can also be used to allow customers the
avenue to buy products or services and offer post-purchase support.

Excellence and Service

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Unit-1 Creating a BUSINESS MODEL Deemed to be University

8. Channels

● Types of Channels may include: sales network, wholesalers, online retailers and own
Internet sales.

● There are two types of channels

○ Owned channels: company website, social media sites, in-house sales, etc.
○ Partner channels: partner-owned websites, wholesale distribution, retail, etc.

Excellence and Service

 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
8. Channels

● Amazon expanded from selling books to general retail and other services by
regularly/systematically announcing in the existed channel.

● Intel marketed its chip to PC purchasers than waiting for the PC Marketers alone doing it

Excellence and Service

 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
9. Customer Relationships

There are several types of customer relationships

● Personal assistance: you interact with the customer in person or by email, through phone
call or other means.
● Dedicated personal assistance: you assign a dedicated customer representative to an
individual customer.
● Self-service or automated services: here you maintain no relationship with the customer,
but provides what the customer needs to help themselves.
● Co-creation:
Here the company allows the customer to get involved in the designing or development of the product. For
example, YouTube has given its users the opportunity to create content for its audience.

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 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
9. Customer relationships

● You can understand the kind of relationship your customer has with your company through
a customer journey map.

● It will help you identify the different stages your customers go through when interacting
with your company. And it will help you make sense of how to acquire, retain and grow
your customers.

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Customer Journey Map

It will help you identify the different stages customers go through when interacting with the Co.
It will help you make sense of how to acquire, retain & grow your customers.
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Unit-1 CREATING A BUSINESS MODEL
9. Customer Relationship
● Tesco succeeded with a 'customer first' policy.
● Cisco collaborated with customers to see off the competition with innovative technology.
● Lotus Notes was continually re-engineered to maintain its customer base.
● Fiat canvassed car buyers and built what was wanted.

Small, personal companies may weaken their customer relationships by going online.

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Unit-1 CREATING A BUSINESS MODEL
To fulfill this role, the business model needs the 9 basic elements:

1. Customer Segments:
Finding out whom the customer will be (along with the segments).
Who are the customers? What do they think, see, feel and do?

2. Value Propositions:
The value proposition the business will provide will be explored in detail.
What value does the Co. provide? Why do customers buy and use?

3. Revenue Stream:
Revenue streams will be validated within the model.
How does this business generate revenue from the value provided? What are the most
important assets and resources a company must have in order to be competitive
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Unit-1 CREATING A BUSINESS MODEL
9 elements of the business model canvas
4. Key Resources:
Key Resources:
What are the most important assets and resources a company must have in order to be
competitive?

5. Key Partners:
External business partners will be identified.
Partners involved in delivering the business’s value including those who provide resources
and conduct business.

6. Key Activities:
The key activities the business will be identified in microscopic detail
What are the most important strategies for selling, value offers?

Excellence and Service

 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
9 elements of the business model canvas

7. Cost Structure:
The cost structure of the product or service will be worked out in detail.
What are the company’s major costs? What do they have to do with revenue?

8. Distribution Channels:
How are these values ​promoted, sold, and delivered? Why? Is it effective?

9. Customer Relationship:
How do you treat customers through their transaction process?

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Deemed to be University
Unit-1 CREATING A BUSINESS MODEL

The Business Model Canvas

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Unit-1 CREATING A BUSINESS MODEL
The Business Model Canvas

● The business model canvas is a strategic management tool that lets you visualize and
assess your business idea or concept. It’s a one-page document containing nine boxes that
represent different fundamental elements of a business.

9 elements of the Business Model Canvas

● The business model will act as an intermediary between the technical input and the
economic output.

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Unit-1 CREATING A BUSINESS MODEL Deemed to be University

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Unit-1 CREATING A BUSINESS MODEL
How to Make a Business Model Canvas
here are these nine building blocks in the business model canvas or otherwise it is called as
Business Model Canvas Template

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 CHRIST
Deemed to be University

Excellence and Service

 CHRIST
Deemed to be University

Excellence and Service

 CHRIST
Deemed to be University

Excellence and Service

 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL

Types of business models and examples

● Because there are many different businesses, the list of business model types is constantly
changing. A “disruptive business model” innovates on these basic structures. And lots of
businesses earn money from multiple revenue streams, meaning their business models
include several of these types.

● Before rolling up your sleeves to implement a business plan, you may have to really
finalize your business model by considering all factors affecting it. Things like …..
which products/ services you want to sell initially…which market you want to target, and
how you are going to monetize your business.

Excellence and Service

 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL
Types of business models and examples

● Sometimes, the success of a startup comes from the combination of different business
models. Eg. There are hybrid models; such as businesses that combine internet retail with
brick-and-mortar.

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Unit-1 CREATING A BUSINESS MODEL Deemed to be University

12 Major Types of Business Models

1. Retailer Model
2. Manufacturer Model
3. Fee-for-service Model
4. Subscription Model
5. Bundling Model
6. Product-as-a-service Model
7. Leasing Model
8. Franchise Model
9. Distribution Model
10. Freemium Model
11. Advertising or Affiliate Marketing Model
12. Razor Blades Model
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Key advantages of Business Models

● A robust business models give the company a extra competitive edge in the industry.

● Moreover, a strong business model provides the company good reputation in the market-
place encouraging the investors to remain invested in the company.

● Making the business model strong leads to an ongoing business profit; leading to things
like increase in cash reserve, new investments and so on …
Thus, proven business model brings a financial stability in the organization.

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 CHRIST
Unit-1 Creating a Business Model Deemed to be University

Finally,
Key Takeaways
● A Business Model is a company's core strategy for profitably doing business.
● Models generally include information like products or services the business plans to sell,
target markets, and any anticipated expenses.
● There are dozens of types of business models including retailers, manufacturers, fee-for-
service, or freemium providers.
● The two levers of a business model are pricing and costs.
● When evaluating a business model as an investor, consider whether the product being
offered matches a true need in the market.

Excellence and Service

 CHRIST
Deemed to be University
Unit-1 CREATING A BUSINESS MODEL

By leaning Unit 1 Part 2 you should be able to answer questions lime

1. What is a Business Model (BM)? Explain the key elements of a Business

Model
2. What are their strengths and weaknesses of a BM?. Compare and contrast
three business models.
3. What are the major types of BMs ?

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